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Investing.com – The gold market is trying to hold on to support at 2000 an ounce, with volatile market expectations turning once again towards a Federal Reserve hike at least next month, hours before the Fed is due to be released.
Meanwhile, the US dollar fell in early trading on Tuesday, giving up some of the previous session’s gains.
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data scenarios
Friday’s official jobs report, released over the Good Friday holiday, gave the US dollar a boost as it showed resilience in the labor market, with non-farm payrolls reporting increasing by 236,000 jobs last month, pushing the unemployment rate to fall to 3.5%.
This strength suggests that the Fed has room to continue raising interest rates when policymakers meet next May, but it contrasts with weaker data released earlier in the week that showed US job opportunities to their lowest levels in nearly two years. in feb.
And after the data that indicated the flexibility of the labor market, inflation is expected to remain at high levels, that is, to remain stable or rise more than expectations, which may prompt the US Federal Reserve to raise interest rates at its next meeting, which hinders the upward path of gold and supports the dollar.
But if the data resulted in a rise in inflation less than expected and the surprise occurred, the Fed is expected to prove interest rates, which could push gold to record levels and drop the dollar.
On the other hand; The dollar may decline if concerns prevail over the US Federal Reserve’s ability to curb high inflation.
Insurance Policy
Although tensions have eased in the global credit market since the collapse of two major regional banks in the US and Credit Suisse, one of the largest in Europe, Nitish Shah, head of commodity research at WisdomTrees, said the biggest banking crisis since the 2008 Great Financial Crisis is far from over.
He said that after more than a decade of loose monetary policies and cheap liquidity, financial markets are in no position to handle the Fed’s aggressive tightening cycle. Shah added that while investors do not know which bank or market will fail next, the distortion caused by the rapid shift to quantitative tightening from QE significantly increases the risk of further problems in financial markets.
In this environment, Shah said, gold is an important strategic risk asset and should be considered an essential “insurance” policy for investors.
“Below $2,000, it definitely pays to put some gold in your portfolio while you wait for some of these risks to materialize,” he said.
He added, “Gold below $2,000 looks cheaper as financial market risks increase.”
interest forecast
The head of fixed-income investment at BlackRock, Rick Rieder, confirmed that the US Federal Reserve may not need to raise interest rates further to curb inflation.
This comes amid fears of the repercussions of the banking sector turmoil last month and recent jobs data that give a signal of a possible slowdown in the US economy.
The “BlackRock” official added that the US jobs data showed a slowdown in wages and job growth, which may prompt the “Fed” to wait on the rate hike rate.
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